Insurance Requirements for a Lease

Carlease Staff - March 1, 2018

Insurance Requirements for a Lease

Prior to driving your new leased vehicle home, it’s imperative to ensure your vehicle has the proper insurance required by law. As a matter of fact, most leasing companies will not allow you to drive the vehicle home without proof of the following types of insurance:

  • Liability coverage (bodily injury and property damage)
  • Comprehensive insurance
  • Collision insurance

Let's take a deeper dive into each of the required types of insurance for a car lease and the coverage it provides.

Liability Coverage for Lease Vehicles

Virtually every car lease contract requires you to have personal liability coverage. This pays for the following in the event you're found at fault of an accident:

  • Medical care,
  • Damaged property, and
  • Lost wages for other passengers and drivers.

Liability insurance helps defray legal costs in the event you’re sued. Most car leasing companies will require you to carry liability coverage. This is usually to the tune of $100,000 per person and $300,000 per accident.

Bodily Injury & Property Damage Liability Coverage

Liability coverage breaks down into two main categories:

  • Bodily injury (BI) insurance covers lost wages and medical expenses for insured passengers and drivers.
  • Property damage (PD) liability covers the costs of replacing or repairing damaged vehicles as well as other property, such as porches, buildings, etc

Comprehensive Insurance for Lease Vehicles

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Car leasing companies will also require you to carry collision and comprehensive coverage. Comprehensive coverage includes all of the unexpected elements that can spring up in your driveway or on the road. This coverage helps pay for replacements if your vehicle is totaled or repairs anytime your vehicle is damaged by:

  • Vandalism,
  • Natural disasters,
  • Fire,
  • Theft, or
  • A falling tree branch.

Collision Coverage for Leased Vehicles

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When you pair comprehensive coverage with collision coverage, you effectively possess “full coverage.” Simply put, collision insurance helps you. If the accident is a result of your actions, collision coverage can help cover the costs you incur.  Most car lease contracts will require you to have comprehensive and collision coverage with a maximum deductible of $500.

Gap Insurance

Some people assume collision and comprehensive coverage provides full protection. However, whenever you’re leasing a new vehicle and experience a total loss, you could be in store for a very, very rude awakening.

Say you owe $20,000 on your lease contract, and the vehicle is totaled. Since most of a new vehicle’s depreciation happens within the first three years, the insurance company values the vehicle at only $14,000.

In this case, you’d be responsible to pay the difference or gap, which would be $6,000 dollars. To prevent this from happening, gap insurance pays the difference between what you owe on your car lease and the vehicle’s market value at the time of the accident.

Protect Yourself with the Proper Insurance Requirements

As previously mentioned, most dealerships and leasing companies will not allow you to drive away in a leased vehicle without providing proof of the proper coverages. This step protects you, the dealership, and the leasing company.

If the dealership allows you to drive away without verifying your coverages and you were to get into an accident on the way home, the leasing company could go after the dealership for failing to do their due diligence.

However, it’s ultimately up to you to ensure you meet your lease insurance requirements. Review your contract to understand what’s required. Then you can shop around to find the best insurance rates.

Questions? The experts at Carlease.com are here provide more insight into the insurance requirements for your respective state. Visit our showroom to browse hundereds of makes and models to find your next lease today!

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